With a background in economics and public policy, I've covered domestic and international energy issues since 1998. I'm the editor-in-chief for Public Utilities Fortnightly, which is a paid subscription-based magazine that was established in 1929. My column, which also appears in the CSMonitor, has twice been named Best Online Column by two different media organizations. Twitter: @Ken_Silverstein. Email: ken@silversteineditorial.com

Boulder's Bid For Xcel Energy's Local Assets Is Remarkable But Expensive

It is not unusual for a city to run a utility. But it is uncommon for one to attempt a hostile takeover. That’s what Boulder, Colo. is trying to do. And this week, it took the official and legally necessary step of letting Xcel Energy know of its plans.

Forced sales are extremely difficult. If the deal happens at all, it will be because the utility has consented to it — that it got a handsome check for its delivery system.

By sending a letter of intent to Xcel, the city has triggered formal negotiations. In doing so, Boulder is informing the utility of the assets that it would like to acquire so that it can provide electric service to the 100,000 people who live there.

Many obstacles exist. But the most prominent would be reaching a consensus as to what its transmission and distribution network is worth: Boulder’s citizens have agreed to pay $214 million while Xcel is waiting to see what the eventual appraisal says. Unofficially, the utility says that its system worth at least $500 million.

“Our folks are still looking at the letter of intent,” says Michelle Aguayo, spokesperson for Xcel. “We have not had time to digest it.”

The letter of intent follows an ordinance that the Boulder City Council had adopted in August 2013. That proclamation said that the city would officially begin the process of “condemnation” in January 2014. However, in November 2011, Boulder’s residents had voted to look further into whether it should municipalize Xcel’s assets within city limits.

Now, though, Boulder wants to acquire some of those assets that are outside of the city’s purview. Xcel says that it is because it would make such a takeover cheaper while Boulder says that such a move is necessary to provide durable electric to those within city limits. The Colorado Public Utility Commission must decide the matter, noting that its obligation is to protect all citizens.

As far as Boulder goes, it says that it will pay for Xcel to appraise its assets. In June 2014, the utility will provide the city its business plan, or its future electric generation portfolio.

Prior takeovers have centered on the quality of service. But Boulder’s goals are different. It has sought to reduce the region’s carbon footprint and it would like to install more wind and solar energy than Xcel would do on its own.

“This notice starts what we hope will be productive and collaborative formal conversations with Xcel Energy about the equipment we would need if we choose to meet our community’s energy goals in this way. It would benefit everyone – the city, Xcel Energy and ratepayers across Xcel’s service territory – if both parties could reach an agreement on this issue,” says Heather Bailey, executive director of Energy Strategy and Electric Utility Development for Boulder.

The city has said that renewable energy would make up a third of its offerings by 2017 for the same cost that its citizens now pay Xcel. That compares to about 20 percent today. It has also said that greenhouse gases would fall notably under its plan. Xcel is reluctant, it adds, because the utility would prefer instead to invest more in combined cycle natural gas plants.

The argument against taking on such a huge initiative is mostly about money: It will take billions of dollars — and lots of energy and tenacity, as well as obtaining the expertise. Xcel, for example, says that Boulder is under-estimating its bills by about $10 million to $15 million a year.

It is also saying that Boulder under-estimates operational expenses by improperly figuring both the cost of wind energy and integrating it onto the grid. The wind power, meantime, must be backed up by natural gas plants that are running at all times. Generation and distribution are large capital expenditures while the engineering, fuel and maintenance all add up. Xcel, moreover, is emphasizing that it is one of the nation’s top wind energy providers.

If Xcel chooses, it could drag this out. To that end, the legal issues would have to play out at the state and federal levels and be presented to the various energy commissions. And then there would be the appeals process. Things change and over time and Boulder could wear down.

Boulder, however, is committed, spending $2-$3 million a year on the proposed acquisition. But how for long? Xcel, conversely, could consent — if the price is right. Boulder, though, has financial limitations that could preclude an eventual takeover but that may ultimately result in Xcel making major concessions.

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Surprise, surprise: a city wants to buy the local utility’s network and the utility estimates an enormous price. That’s just logical, isn’t it? The profits for electricity networks are high, of course they don’t like to sell it. But running its own network and power plants is indeed a great opportunity for a town to trigger the development of renewable energies – we’ve had several cases here in Germany where citizens forced their municipalities legally to rebuy the net, and these are towns much bigger than 100,000 inhabitants (f.i. see http://unser-netz-hamburg.de/). Moreover, NOT doing the shift towards renewables would cost much much more… Think of your grandchildren and their children! for more info, see also http://clmtr.lt/c/Byf0fz0cMm

Surprise, surprise: A city wants to buy the local utility’s network and the utility estimates an enormous price: That’s just logical, isn’t it? The profits for electricity networks are high, of course they don’t like to sell it. But running its own network and power plants is indeed a great opportunitiy for a town to trigger the development of renewable energies: We’ve had several cases here in Germany where citizens forced their municipalities legally to rebuy the net – and these were towns much bigger than 100,000 inhabitants (see f.i. http://unser-netz-hamburg.de/). Moreover, NOT doing the shift towards renewables would cost much much more than doing it… remember your grandchildren and their children! for more info, see also http://clmtr.lt/c/Byf0fz0cMm

What is most interesting to me is that now everyone will learn what “experts” really thing a Utility is worth, which is of course dependent upon many variables, especially what its regulators choose to charge its ratepayers for their energy both now and in the future!

The City of Bolder is brilliant, because should the asked price be really high they can then ask both the Utility and their Regulators why that is the case; which will be something very important for ratepayers to know, especially now that ever more solar capacity is being installed, (even in Colorado) along with eVehicles!

It is exciting to see Coloradans supporting expanded wind power in their state. With over 1,500 wind turbines already in the ground, the state is a leader in wind power and powers more than 11 percent of its grid with this clean, reliable energy source.

Up to 5,000 jobs are supported by wind power in Colorado, with major manufacturing facilities making blades, towers, and turbine assemblies in the state. Truly, the Centennial State is a hub for wind power and an important player in this American success story.

Wind power produces no pollution, uses virtually no water to generate power, and, locked in to 20-year power purchase agreements, is immune to price shocks, saving ratepayers money.

We all now know what current Energy costs us but what will Energy cost US in the future?

If the Solar industry has any say, it will be far less than it is today, since ever more ratepayers will be generating at least a part if not all of their own Energy themselves and/or once their initial payback period has past, I imagine them paying “nothing” for their own energy!

If this glimpse of the future is accurate, then what will become ever more valuable will be the ownership of the GRID itself, since almost everyone will agree to a “small” monthly fee just to be connected to it and as we all know, millions of small monthly payments equals huge profits, as the current Utilities all know…